ECB Releases Results of Euro Area Bank Lending Survey in October 2021
The European Central Bank (ECB) published the results of the quarterly bank lending survey, which provides insights on bank lending conditions in the euro area. The survey supplements existing statistics with information on the supply of and demand for loans to enterprises and households. The results show that credit standards remained broadly unchanged for firms and tightened for housing loans, loan demand by firms and households continued to increase, and the monetary policy measures of ECB continue to support lending conditions and volumes.
The results reported in the October 2021 survey relate to changes observed in the third quarter of 2021 and expected changes in the fourth quarter of 2021, unless otherwise indicated. The October 2021 survey was conducted between September 20, 2021 and October 05, 2021. A total of 146 banks were surveyed and the following results emerged:
- Regarding loans to households for house purchase, euro area banks reported a net tightening of credit standards (net percentage of 8%), while credit standards for consumer credit and other lending to households also remained broadly unchanged (net percentage of -1%). Banks referred to risk perceptions related to the improved economic outlook as having a net easing impact on credit standards for loans to firms and households. Banks’ risk tolerance and their cost of funds and balance sheet situation had a neutral impact for loans to firms and consumer credit, while banks reported a net tightening impact of these factors for housing loans. In the fourth quarter of 2021, banks expect credit standards to tighten for loans to firms and for housing loans and to ease slightly for consumer credit.
- Banks’ overall terms and conditions—that is, the actual terms and conditions agreed in loan contracts—eased slightly, on balance, for loans to firms, while they tightened for housing loans and remained broadly unchanged for consumer credit in the third quarter of 2021. For margins on average loans, banks continued to report a narrowing in net terms across loan categories. Margins on riskier loans also narrowed for housing loans but widened for firms and remained unchanged for consumer credit.
- Banks reported, on balance, a slight increase in firms’ demand for loans or drawing of credit lines in the third quarter of 2021. Financing needs for fixed investment contributed positively to loan demand for the second consecutive quarter. In addition, loan demand was supported by firms’ financing needs for inventories and working capital, mergers and acquisitions, and debt refinancing and restructuring as well as the low general level of interest rates. Banks reported on balance that firms’ access to internal and alternative external financing sources had a negative impact on loan demand.
- Euro area banks’ access to retail and wholesale funding continued to improve in the third quarter of 2021, as per the surveyed banks. Banks reported that the ECB’s asset purchase program, the pandemic emergency purchase program, and the third series of targeted longer-term refinancing operations (TLTRO III) continued to have a positive impact on their liquidity positions and market financing conditions. Asset purchases and the negative deposit facility rate had a net easing impact on lending conditions and a positive impact on lending volumes, mainly for loans to firms. Also, banks reported that TLTRO III had a net easing impact on terms and conditions and a positive impact on lending volumes across all loan categories.
Related Links
Keywords: Europe, EU, Banking, Lending, Bank Lending Survey, TLTRO, PEPP, Credit Risk, ECB
Previous Article
BCBS and IOSCO Propose Further Policy Work on Margining PracticesRelated Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.